Due to the prevailing dominance of smart cards as the most viable model for e-money at the time, the focus on financial stability analysis was primarily centered on prudential supervision of issuers. Unlike contemporary discussions surrounding Central Bank Digital Currency (CBDC), concerns such as the potential for bank runs and the impact on commercial bank funding were less pertinent during the era of Avant. This is because Avant, operating as a card-based system, did not facilitate the seamless use of e-money as a refuge, distinguishing it from traditional bank deposits.
Withdrawals, whether in the form of e-money or physical cash, followed a similar process, typically occurring through ATMs or branches in the case of a comprehensive withdrawal from a bank. Additionally, the anticipated low transaction volumes of e-money systems, including Avant, were expected to remain within manageable limits. Notably, with Avant’s issuer being the central bank, concerns regarding the capitalization of the issuer and the safety of customer funds were alleviated.
However, it’s crucial to recognize that as the landscape evolved and commercial e-money issuers entered the scene, pertinent questions regarding capitalization and fund security gained prominence. These questions eventually found resolution through subsequent regulatory measures that were implemented at a later stage. The Avant experiment, therefore, serves as a precursor to the broader dialogue on the intersection of financial stability and the dynamic evolution of electronic forms of currency.
